I can totally relate to what you just described.
Harvardâs NPC at https://college.harvard.edu/financial-aid/net-price-calculator does make it easy to do âwhat if?â scenarios with different levels of income and assets.
I did the calculator using $70,000/year income and various asset levels. The net cost is still very low, even with hundreds of thousands of dollars in non-retirement savings. Iâd say that is extremely generous aid.
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Oh I agree it is generous if you get in at Harvard, I just like to keep it real that a family making $150,000 a year with NO assets, which was the comparison, is not typical. Nor is it a âlow income familyâ which was the OP.
I find that on CC there is often a blind spot about the actual middle 40% of U.S. household incomes or even what that household income would be, or how you can live to make that work. The example provided seemed to emphasize that. $150,000 in 2022 is the 80th percentile for the US and above median income in almost all US cities including NYC area. Thatâs all.
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Iâm not sure I understand your point. At HYPSM type schools the 150k income family is not âpenalizedâ for saving in retirement accounts or home equity, which is where most families at that income level are likely directing their excess funds. Based on the NPC, that same family can have 0-200k in taxable savings without the 18,500 price increasing⊠After that, ~5% of excess savings is treated as available for college.
The 75k income family would pay roughly the same with 500k in taxable, which would be unusual for a family at that income level, or 3500 (from student employment) with 200k taxable assets.
So, for families at these income levels the generous need-based schools are cheaper than most state schools and there isnât really a âpenaltyâ for having typical or better-than-typical savings.
HYPSM and the need-based aid paradigm arenât really the driver of the college affordability problem.
This problem is largely caused by a decline in state funding for higher education, as mentioned, as well as legacy costs of public pension programs in many states (increasing current expenses for school systems and/or competing for general fund expenditures). This is a multi-decade trend exacerbated during the GFC. There are other factors, but these are the biggies.
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It isnât really that any part of âexcess savingsâ should be available for college. The college expects you to âearnâ ~5% (interest, dividend, equity appreciation, etc.) from that savings every year (regardless how much you actually generate from that savings) and use that âearningâ to help pay for college.
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Yes, good point!
If I may be so bold as to interject. I think the misunderstanding comes from the focus on HYPSM type schools. Some are saying @sursumcorda 's concerns are offset by the fact that HYPSM type schools provide generous Need Based Aid to families up to $150K.
Sursumcorda is saying the fact that ten universities (out of 4000+) have such a large inclusion (up to $150K/yr income) for Need Based aid doesnât make up for the fact that for 99.9% of students/families in the normal middle-middle-income bracket, 99.9% of all universities DO NOT provide much, if any, Need Based aid. Based on what Iâve seen Surcomcorda say previously I will loosely define that middle-middle-income as $40K-$90K.
So yes, HYPSM type schools are a welcome exception to the problem. Unfortunately, that very minor exception does nothing to help almost every family caught in that dilemma, because most families are not applying to HYPSM type universities. This isnât a problem that can be solved by what ten individual schools do. This is a problem that affects students at nearly every other institution.
I apologize to Surcomcorda if I misrepresented their position.
EDIT: I think the discussion might be advanced if we could offer examples of non-HYPSM type colleges that offer generous Need Based aid to families earning up to $90K or $100K.
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I agree that most families in this income bracket are gapped by most colleges. In states such as mine (Pennsylvania) even the state universities (PASSHE) can gap big- time, even for Pell grant eligible families such as ours. My D22 was gapped by both in-state public and private schools. Fortunately, we are able to pay the gapped amount, without loans, at the private school she chose, but many families at this income level are not.
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Because of a strange set of circumstances, that was my situation when I had 2 graduating from hs. But I was losing that $150k job (closed agency) when they were starting college.
Even if they could have gotten into Harvard (they couldnât), the $18k each would have been above the budget I set. Luckily, they found other schools that were below the budget ($15k each). If they had gotten into Harvard or Yale would I have stretch and borrowed and sold my kidney? Iâm sure I would have (if theyâd have wanted to attend). Were they very happy at the schools they picked that cost less? Absolutely.
I used to think student loans should go up to match inflation, but I no longer do. Most grads have trouble repaying the max ~$28k in loans as it is. Mine didnât borrow that much and one has no trouble repaying and for the other it will be extremely hard, even with a masters degree.
But I think most can go to a state school for a reasonable amount, and even under the $18k theyâd have to pay at Harvard. Florida, Maine, Utah, Wyoming. It may not be the flagship, but a good education can be had. It may be unfortunate that your parents chose to live in a state you donât like but the schools may still be good. Or you can move to a new state and wait until you are independent and qualify for instate tuition.
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$18k is hard to do if the student lives on their own near the campus. Not everyone in Wyoming lives in reasonable commute distance to the one four year school in the state. UW Cost of Attendance estimates direct costs of about $19k living on or near campus, and $23k including other costs like books.
About 50 colleges are both need-blind and meet âfullâ need for US students. Less than a handful of them are public. The big difference is their treatment of home equities of applicantsâ primary home and less than half of them (all privates) actually ignore that equities for financial aid purpose. Others all consider home equity but may cap the equity based on the applicantâ family income. The other difference is the use of loans as part of financial aid packages. For a typical family that earns less than, say, $150k, these two elements account for most of the differences in need-based financial aid packages.
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Honest question: How many of those schools regularly admit students with average stats? Or put another way, how many of those schools have an admit rate higher than 30%? By âhigherâ I mean 50% or 80%.
I ask because the overarching problem solving (I donât think) is not for the tiny percentage of students who could be admitted to a USNWR T40 institution. I think most are concerned with students who are more likely to be admitted to all the other universities.
A solution that is not applicable for 99% of all applicants should not be considered a solution.
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I am sorry. I thought the convention on CC was that the pulled quote indicated to what the reply was directed. My pulled quote was about the hypothetical âlow incomeâ family of $150,000 annual income with âno assets.â Thus, I thought it was clear that I was responding to the pulled quote. I was making zero statement about reasons for the cost of college increasing, public funding, etc. Next time I will try to be more explicit instead of just pulling the quote and responding.
So what were my points:
- A family of $150,000 is not âlow incomeâ or even median income but is close to twice median income and would typically have SOME assets which could be house equity, retirement or otherwise. And
- That many families live functionally at half that income, i.e. median household income.
Why did I make these points instead of just letting it pass as an example?
I made Point 1 because I find CC posters (7 years ago and now) tend to misjudge median income, high income, low income as referenced to percentiles in the US and every time a comment like that stays unchallenged, it may contribute to this misapprehension. Thus, like drops of water, I hope my calling out such an example as atypical and NOT low income might penetrate these perceptions.
I made Point B because I have found that on CC, people dismiss claims that families are saving and living on median income unless details are given. (And often then as well.)
So to be clear, I agree and gave thumbs up to posts about state colleges, etc. I was ONLY responding to one example which I put in the pulled quote at the top.
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Youâre right that the high cost of college education is a huge problem for the majority of American families with college age kids. Like the problem in healthcare, Iâm not sure there is a solution unless weâre willing to make some compromises (e.g. raising taxes to better fund public universities, cutting cost of university programs that are ancillary to the schoolsâ primary missions, etc.) But compromises are hard (or even impossible) to come by these days.
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State schools in California are more like 26-44k a year range. I have a friend whoâs pretty close to this example. Lower than 150k income, no assets but home equity, no money to help kids with college. Iâve told her her best bet for her 2 kids is live at home and attend the state directional, taking out student loans for the max and working, or get test scores and grades high enough for Alabama type auto merit.
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Financial Aid is a system. Not a perfect one by any means, but one designed to cover âtypicalâ situations. Itâs also designed to make it hard (not impossible, but hard) to cheat- parents with a verified income of $70K per year but who have 5M in assets (i.e. atypical assets at that income level) are going to be expected to sell stock, liquidate their bond portfolio, etc. to help pay for college. Thus-- the oft repeated advice âmake less money to get more aidâ doesnât always work.
Will it be âfairâ in every situation? Of course not. A system designed to cover âtypicalâ will never be perfect. Is it possible to cheat? of course, there are always workarounds for someone motivated to do so. Do the more generous colleges provide a mechanism for Professional Judgement for an atypical case? Yes. Will the colleges which only have the means to gap a kid- no matter how much the need --care that the family is supporting an elderly grandparent, has high medical costs due to a special needs sibling? Not likely- they donât have the funds to give away, so understanding how the financial forms donât adequately reflect the familyâs cash flow doesnât really matter.
Financial literacy is REALLY important for families. It upsets me so much when I meet people IRL (and on CC) who designate a brokerage account as âmy retirement fundsâ and then get furious that colleges wonât exclude those assets. Why am I upset? Yes, financial aid- thatâs a bummer. But over an adultâs working life, the tax efficiency of saving those funds in a designated retirement vehicle instead of an âimaginaryâ âThese are my retirement dollarsâ canât be beat. And there are zero employers (at least that I am aware of) that will match your âslush fundâ savings, but there are substantial numbers of employers who provide a full or partial match to funds you save in a legally designated retirement vehicle. This is free money, folks.
And in situations with a disabled family member, understanding the alphabet soup of public assistance is critical. What asset exclusions are and at what age they kick in; how to protect the disabled family memberâs funds so that they are not in the âgeneral pot of savingsâ which will show up as available to pay for college; etc.
The generation that will read 50 yelp reviews before ordering a sandwich needs to spend at least a little time devoted to financial literacy before they start applying to college.
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Kind of off-topic, but just an FYI because Wyoming has been mentioned here several times:
University of Wyoming has a very accessible in-state automatic merit system for discounts (You must have graduated from high school in Wyoming with a particular curriculum. You cannot move there for this, I donât think, later on.)
To be at the âHonorsâ level of aid, you need a 3.5 GPA in the approved state curriculum and a 25 ACT. It basically covers tuition and fees. You need a 2.5 GPA to maintain for four years. Then if your FAFSA is low, they will meet unmet need 100% for COA minus $2000 the student is supposed to earn. You can even get almost as much automatic merit aid for a 21 ACT/3.0 GPA in high school! Then you only get 25% need met for COA
.
They also have Trustees Award competition for those really high stats students in-state. Those are great awards as well, but are not automatic. For a lot of majors especially in the Engineering, Geosciences, etc. it is a fantastic school, and the town is awesome.
I wish we still lived in Wyoming for about 1000 reasons, but we were not able to afford to stay there. Since it was mentioned a few times, I just wanted to point out, Wyoming is one of those states with very generous aid for in-state students who are pretty average in stats and is quite affordable.
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Very few, if any, students pay $23k for instate at Wyoming. There are several scholarships students can get and almost all do get them. They have a lot of ânamed scholarshipsâ from alums and those are awarded for teachers, nurses, engineers, theater, etc. The student actually writes a thank you letter to the alum or the alumâs family for the scholarship. There are department scholarships in almost every dept.
I met a kid (Wyo resident) at orientation and he told me he had 6 siblings and his parents agreed to pay for the first year but then they were on their own. Each one figured it out - they became RAâs, joined ROTC, got scholarships, worked, but they all figured out how to do it (he was trying to get my daughter to join ROTC). Tuition has gone up a little since then, but the scholarships have gone up too.
My kids had a $15k budget because that was about what a Florida state school would have cost (and really more than I could afford). Both came in under budget by choosing schools that met that financial budget, one at Wyoming and one at Florida Tech (a private school). Maybe now they would need $18k, but my daughter is still at Wyo; she has a funded position for tuition, fees, and insurance and only has to pay her living expenses, which are minimal. She pays $400/mo for a shared house, and that includes utilities! Not luxurious by any standard, but sheâs sleeping indoors, with heat.
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